Customs value in related-party
or intercompany transactions

An increasing number of internationally operating businesses are facing customs issues in their import and export procedures. This is due, in part, to Brexit. The reality is that Dutch Customs regularly challenges the customs value in related-party transactions or intercompany stock movements, because, in such transactions, they cannot typically rely on the purchase or selling price of the goods to determine the customs value. This value forms the basis for the import duties payable. In this article, we will set out the implications of such transactions and we will tell you what to look out for.

Customs value

The customs value is basically subjective; some elements add to the value and others detract from it. The customs value is based on the agreed price between the parties. Normally, it is a reflection of the transaction value (as per the transaction value method), meaning that it is derived from the price that was paid or is payable on sale for export.

Transaction value method not applicable

The transaction value method cannot always be applied, however. If a company has warehouses in both the UK and the Netherlands, for instance, and it moves stock between these warehouses, there is no selling price on which to base the transaction value. Customs may also challenge the agreed price in related-party transactions. Without the right evidence and/or documentation, they will nearly always argue that the price was affected by the fact that the parties are related and proceed to increase the customs value.

Please note: In related-party transactions, transfer pricing documentation can prove to be useful for the purposes of determining the customs value. That said, the transfer prices cannot be used for customs purposes without making adjustments, so caution is advised.

If the transaction value method cannot be applied, the declarant should adopt a different valuation method, such as the deductive value method or the computed value method. With these methods, the cost/purchase price or subsequent selling price of the goods is adjusted to achieve an appropriate customs value. What follows is a – highly simplified – example to explain the deductive value method:

X Inc. manufactures bin bags in the US and supplies them to X BV in the Netherlands (a fellow subsidiary). The cost price of a bin bag is €0.03; this is the price agreed between X Inc. and X BV. X BV sells the product at a retail price of €0.10 a piece. Of the €0.07 margin, €0.04 goes to transport and marketing costs in the EU. For the purposes of the deductive value method, these costs are deducted from the retail price. The customs value based on the deductive value method is then: €0.10 – €0.04 = €0.06. If X BV had opted to declare the retail price (€0.10) or the purchase value (€0.03) on import, its import duties would have been too high or too low respectively.

Tip: If you overpaid import duties because the customs value was overstated, you can submit a refund request for the three previous years. We would of course be happy to help you reclaim your overpaid duties.